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While the OFFICE of President remains in highest regard at NewEnergyNews, this administration's position on climate change makes it impossible to regard THIS president with respect. Below is the NewEnergyNews theme song until 2020.

ORIGINAL REPORTING: Why A Big Energy Provider Restructured

Editor's note: NRG Energy has turned back to a more traditional business model since this piece was written but NRG Home continues to grow its New Energy efforts.

NRG Energy, the biggest U.S. independent power producer, made the bold choice last year to challenge utility sector disruption by disrupting itself.

Having concluded by early 2014 a “distributed generation-centric” future fostering consumer empowerment and energy customer choice was inevitable, President/CEO David Crane decided on a corporate reorganization. It was designed to leverage NRG’s considerable capabilities, accrued through its success in power generation and retail electricity markets, to capture the emerging opportunities.

Two things informed Crane’s decision, Steve McBee explained to Utility Dive on the sidelines at Greentech Media’s Grid Edge Live 2015. McBee is the man chosen to lead the NRG Energy’s charge into distributed generation as President and CEO of NRG Home.

“One is that climate change is the challenge of our time and NRG, as a major player in the independent power space, has a major moral obligation,” he said. “The other is that any business that relies on the grid as a very centralized, antiquated machine to deliver their products in a world that is becoming decentralized and digital is in trouble.”

The $12 billion corporation was reorganized into three divisions, McBee explained. NRG Energy remains the core wholesale power generation business with a 49,400 MW total generation capacity. NRG Renew covers utility-scale renewables, with 1,300 MW of solar and 3,200 MW of wind, as well as the company’s micro-grid business.

NRG Home

NRG Home is “about a $6 billion company,” McBee said, with $620 million in unadjusted earnings, 3.5 million customers, and 5,000 of the corporation’s 10,000 employees.

The NRG Home division’s value proposition is in its two-sided “platform.” On one side is the large competitive retail electricity business with 2.7 million customers in Texas and the Northeast. On the other is a constellation of “much smaller but much faster businesses” in residential solar, electric vehicle charging infrastructure, portable power and power on the go, home security and connected homes, and natural gas.

The retail electricity businesses provide a “very steady, value play, EBIDA business that prints a lot of cash and grows incrementally,” McBee said. Most of the smaller businesses are still losing money, “but are growing at super high rates in markets that have massive ceilings.”

Together, they allow NRG Home to unite “the entire ecosystem of the consumer energy space in one place,” McBee said. “The real unique opportunity we have is to cross-walk the growth businesses into that 2.7 million retail customer channel and offer those customers, in addition to theretail electricity we are selling them from a single point, sometimes unsustainable, and fairly conventional energy solution, a portfolio of energy solutions curated to their lifestyles that is more sustainable and cheaper.”

The organizing principle is the customer, McBee said. The company’s strategy, value proposition, and value creation are aimed at figuring out what he or she wants “as opposed to pushing a one-size fits all solution into the totality of our business.”

While new technology and new gadgets themselves get a lot of attention, fewer notice they have destroyed the “centralized provider-driven service models and replaced them with decentralized, demand-driven service models that have empowered customers in ways that are totally unprecedented,” McBee explained.

Companies that don’t understand what is happening are struggling, companies that are empowering consumers are seeing success, and that is “great news for agile energy providers,” he said. NRG Home customers will get “more imaginative solutions and services” that will be “cleaner and more sustainable.”

By 2018 or 2019, consumers, particularly millennials, will be a huge market force, McBee believes.

“They will expect from their energy providers what they expect from all their other consumer providers, which is products that are reliable, affordable, sustainable, and highly tailored to what they need to make the energy part of their lives work,” he said.

Before his post at NRG, McBee was running a Washington, D.C., advisory firm for over a decade when the worsening climate crisis, resource depletion, population growth, and urbanization issues compelled him to try to influence the policy process.

“In a perfect world, you would address those issues through progressive policy,” he said. But he quickly realized the political system would not respond to the gathering crises.

McBee concluded they would only be addressed “if large companies with scale and bandwidth could view these huge problems as huge opportunities,” he said. If they saw the challenges as a means to create shareholder value through new products and new services, it would also drive the social change.

“The capital markets and the corporations were the places where these problems were going to be addressed,” he concluded.

NRG Energy was among the clients his business took on in seeking ways to drive this change. “When David Crane briefed me on NRG Home, I said we needed to find a really great CEO to run this business,” McBee said. “I thought it was the best expression of what I was thinking about that I had ever seen.”

From thousands of names proposed to run the company, Crane – who was looking for a non-traditional candidate – picked McBee. He accepted because “it is by far the best positioned company in the market to take advantage of the disruption coming," he said. "If it was done well and at scale, it could make a little difference in the world.”

Solar

NRG Home has rooftop solar operations in the nine states (Arizona, Connecticut, Hawaii, Maryland, Massachusetts, New Jersey, New York, California, North Carolina, and Pennsylvania) where the economics work out, McBee said. But the economics will get better elsewhere.

Texas sun is ample but solar is not cost-effective for NRG Home’s 1.7 millionReliant retail electricity customers in the state because policies are not supportive and the price of electricity is very low, McBee explained.

On the other hand, the trajectory of solar cost curves foretell aggressive adoption rates that will likely drive industry prices down and Texas solar should reach economic competitiveness by 2018, with or without incentives, he believes. His challenge for now is sequencing, or putting the right products together in the right way until solar reaches parity.

In states where it is competitive, NRG Home’s primary solar offering is through a 20 year lease. NRG Energy’s NRG Yield recently announced it would back further growth with a $150 million fund.

The yieldco initially invested in NRG Home’s existing portfolio of over 2,200 leases across 9 states representing some 17 MW of capacity. It then went to an in-development portfolio of over 6,000 20-year leases across at least 10 states representing a capacity of about 48 MW. Within 12 months, the fully invested fund will back over 15,000 leases representing some 65 MW.

NRG Home offers a residential solar loan in states like North Carolina where the third party ownership financing provided by the yieldco is not legal.

The yieldco will also periodically monetize the residential lease investment, providing cash to reinvest.

His only concern is the “uncertainty” around net energy metering (NEM). “I would trade certainty for some potential modification to the net metering rules,” he said. He is open to a predictable, gradual phase out of NEM similar to that coming for the 30% federal investment tax credit (ITC).

But most utilities are coming into the NEM debate “hot and with a very zero-sum outlook,” McBee said. It is an approach that precludes compromise and means fighting.

“As much as I prefer compromise, I don’t mind fighting because the fights will take many years to resolve,” he said. “By that time it won’t matter because solar will be economic without subsidies.”

The ITC, which has cost taxpayers far less than the subsidies provided to traditional generation resources, got solar off the ground, McBee said. But its scheduled reduction to 10% at the end of 2016 will be nothing more than a “speed bump” for the solar industry, he added.

“We are selling 90% of our solar systems to customers because they are cheaper," he said. "That is our value proposition."

Community solar

NRG Home is also making plans to develop community shared solar, which GTM Research recently called “the biggest solar opportunity in the U.S. in the next five years.”

Community shared solar allows developers to build central arrays and sell shares of the output to those without solar suitable roofs, which are 74% of his solar-interested customers, McBee said. “That is a lot of solar sales we aren’t making.”

Widespread growth of the sector is currently being blocked by a dearth ofenabling legislation. But a customer who wants solar and is willing to pay for solar should not be prevented from getting it by a failure of political leadership, McBee believes.

Community shared solar will be especially good for NRG, he said, because the company can offer a “vertically integrated community solar solution.” NRG Renew can do project development, NRG Home can do the marketing, and NRG Yield can do the financing.

Building electric vehicle charging infrastructure

“We are trying to turn the building of electric vehicle (EV) charging infrastructure into a two-way race with Tesla,” McBee said.

NRG says its eVgo program, currently in 26 cities, is the biggest and fastest-growing public DC fast charging network in the country. Residential customers and businesses looking to offer charging to employees can purchase Level 2 chargers or sign up for a subscription plan. NRG Home plans to take the programs into 70 new markets in 2016.

“If you are investing for the long term, this has to be one of the biggest no-brainers in the history of the world,” McBee said. “We all know how this story ends. It is just a question of whether we are on chapter 2 or almost at the end of the book.”

Internal studies have shown the electricity used in EV charging will not be all that meaningful in boosting demand for NRG’s utility-scale generation.

“We are investing in this business because there are incredible cross-sell opportunities," McBee said.

EV owners are among the customers most likely to want rooftop solar, green premium utility plans, and solar-powered portable power devices, he explained. "That makes them highly valuable customers because of the potential multiple revenue streams and because that customer isn’t likely to go to a different provider."

Finally, McBee said, driving an EV can transform the typical utility customer who never thinks about electricity consumption.

“When you get an electric vehicle, you are dialed in to where the charge is at all times,” he said. “You are monitoring the charge on the app and gaming it for maximum efficiency. When people are in the habit of doing that, it is a major behavioral change.”

They begin to think about other aspects of their energy use similarly and that fits the NRG Home intention, McBee said, “to allow people to generate and manage and share their own energy and to allow them to access it from wherever they are for whatever they need it for, for however long they need it.”

Review of OIL IN THEIR BLOOD, The American Decades by Mark S. Friedman

OIL IN THEIR BLOOD, The American Decades, the second volume of Herman K. Trabish’s retelling of oil’s history in fiction, picks up where the first book in the series, OIL IN THEIR BLOOD, The Story of Our Addiction, left off. The new book is an engrossing, informative and entertaining tale of the Roaring 20s, World War II and the Cold War. You don’t have to know anything about the first historical fiction’s adventures set between the Civil War, when oil became a major commodity, and World War I, when it became a vital commodity, to enjoy this new chronicle of the U.S. emergence as a world superpower and a world oil power.

As the new book opens, Lefash, a minor character in the first book, witnesses the role Big Oil played in designing the post-Great War world at the Paris Peace Conference of 1919. Unjustly implicated in a murder perpetrated by Big Oil agents, LeFash takes the name Livingstone and flees to the U.S. to clear himself. Livingstone’s quest leads him through Babe Ruth’s New York City and Al Capone’s Chicago into oil boom Oklahoma. Stymied by oil and circumstance, Livingstone marries, has a son and eventually, surprisingly, resolves his grievances with the murderer and with oil.

In the new novel’s second episode the oil-and-auto-industry dynasty from the first book re-emerges in the charismatic person of Victoria Wade Bridger, “the woman everybody loved.” Victoria meets Saudi dynasty founder Ibn Saud, spies for the State Department in the Vichy embassy in Washington, D.C., and – for profound and moving personal reasons – accepts a mission into the heart of Nazi-occupied Eastern Europe. Underlying all Victoria’s travels is the struggle between the allies and axis for control of the crucial oil resources that drove World War II.

As the Cold War begins, the novel’s third episode recounts the historic 1951 moment when Britain’s MI-6 handed off its operations in Iran to the CIA, marking the end to Britain’s dark manipulations and the beginning of the same work by the CIA. But in Trabish’s telling, the covert overthrow of Mossadeq in favor of the ill-fated Shah becomes a compelling romance and a melodramatic homage to the iconic “Casablanca” of Bogart and Bergman.

Monty Livingstone, veteran of an oil field youth, European WWII combat and a star-crossed post-war Berlin affair with a Russian female soldier, comes to 1951 Iran working for a U.S. oil company. He re-encounters his lost Russian love, now a Soviet agent helping prop up Mossadeq and extend Mother Russia’s Iranian oil ambitions. The reunited lovers are caught in a web of political, religious and Cold War forces until oil and power merge to restore the Shah to his future fate. The romance ends satisfyingly, America and the Soviet Union are the only forces left on the world stage and ambiguity is resolved with the answer so many of Trabish’s characters ultimately turn to: Oil.

Commenting on a recent National Petroleum Council report calling for government subsidies of the fossil fuels industries, a distinguished scholar said, “It appears that the whole report buys these dubious arguments that the consumer of energy is somehow stupid about energy…” Trabish’s great and important accomplishment is that you cannot read his emotionally engaging and informative tall tales and remain that stupid energy consumer. With our world rushing headlong toward Peak Oil and epic climate change, the OIL IN THEIR BLOOD series is a timely service as well as a consummate literary performance.

Review of OIL IN THEIR BLOOD, The Story of Our Addiction by Mark S. Friedman

"...ours is a culture of energy illiterates." (Paul Roberts, THE END OF OIL)

OIL IN THEIR BLOOD, a superb new historical fiction by Herman K. Trabish, addresses our energy illiteracy by putting the development of our addiction into a story about real people, giving readers a chance to think about how our addiction happened. Trabish's style is fine, straightforward storytelling and he tells his stories through his characters.

The book is the answer an oil family's matriarch gives to an interviewer who asks her to pass judgment on the industry. Like history itself, it is easier to tell stories about the oil industry than to judge it. She and Trabish let readers come to their own conclusions.

She begins by telling the story of her parents in post-Civil War western Pennsylvania, when oil became big business. This part of the story is like a John Ford western and its characters are classic American melodramatic heroes, heroines and villains.

In Part II, the matriarch tells the tragic story of the second generation and reveals how she came to be part of the tales. We see oil become an international commodity, traded on Wall Street and sought from London to Baku to Mesopotamia to Borneo. A baseball subplot compares the growth of the oil business to the growth of baseball, a fascinating reflection of our current president's personal career.

There is an unforgettable image near the center of the story: International oil entrepreneurs talk on a Baku street. This is Trabish at his best, portraying good men doing bad and bad men doing good, all laying plans for wealth and power in the muddy, oily alley of a tiny ancient town in the middle of everywhere. Because Part I was about triumphant American heroes, the tragedy here is entirely unexpected, despite Trabish's repeated allusions to other stories (Casey At The Bat, Hamlet) that do not end well.

In the final section, World War I looms. Baseball takes a back seat to early auto racing and oil-fueled modernity explodes. Love struggles with lust. A cavalry troop collides with an army truck. Here, Trabish has more than tragedy in mind. His lonely, confused young protagonist moves through the horrible destruction of the Romanian oilfields only to suffer worse and worse horrors, until--unexpectedly--he finds something, something a reviewer cannot reveal. Finally, the question of oil must be settled, so the oil industry comes back into the story in a way that is beyond good and bad, beyond melodrama and tragedy.

Along the way, Trabish gives readers a greater awareness of oil and how we became addicted to it. Awareness, Paul Roberts said in THE END OF OIL, "...may be the first tentative step toward building a more sustainable energy economy. Or it may simply mean that when our energy system does begin to fail, and we begin to lose everything that energy once supplied, we won't be so surprised."

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